The Reserve Bank of Australia has held the cash rate at a record low 0.75 per cent, as widely expected by economists.
Having delivered a third 0.25 percentage point cut in five months at its October meeting, the RBA has now paused so it can judge the economic impact of already low borrowing costs and government tax handouts.
Tuesday’s decision came hours after Treasurer Josh Frydenberg confirmed that there would be no change to the RBA’s longstanding 2.0-3.0 per cent inflation target, or the way it is held to account over how it tries to meet it.
While opting to hold the cash rate – a key component in banks’ borrowing rates for businesses and consumers – Governor Philip Lowe again left the door ajar for future downward movements.
“The board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time,” Dr Lowe said in his statement.
More gloomy economic data released on Monday already seems to have reinforced the impression among economists that it’s a question of when – not if – the next rate cut comes.
September’s retail spending data fell well short of expectations, suggesting record low borrowing costs and $22.4 billion in tax refunds have yet to stimulate consumer spending.
The Australian dollar dipped slightly from 68.87 to 68.82 US cents within five minutes of the 1430 AEDT decision.